Presenting more information about the subversion of Operation Green Quest (the investigation into terrorist financing), this program highlights the structural economic relationships that bind the Bush milieu to that of the Saudis. These relationships helped spawn the Islamist element in the Republican Party’s ethnic outreach wing, which overlaps the milieu targeted in the 3/20/2002 Operation Green Quest raids. Central to the development of the Bush/Saudi relationship is the milieu of the BCCI investigation. Not only did key players in BCCI invest in Bush’s unsuccessful energy businesses, but that investment almost certainly was for the purpose of currying favor with “the House of Bush”—the Saudis did not need to invest in unsuccessful oil drilling operations! Moreover, it appears that the Bush/Saudi/BCCI connection is a central factor motivating those who are frustrating the investigation into Operation Green Quest. Central to the theme of this program is FBI chief Robert Mueller’s role in covering up the Justice Department’s investigation of the BCCI case when he was the US attorney in charge of the investigation, as well as the role of the bureau in the frustration of Operation Green Quest.

Program Highlights Include: The Saudi investment in Bush’s Harken Energy; the connections of BCCI players such as Khalid bin Mahfouz in the Saudi financing of Harken; the role of Abdullah Bakhsh of the BCCI in elevating the position of Talat Othman to that of director of Harken Energy; Othman’s eventual succession to the position of adviser to Bush, Sr.; review of the development of GOP operative Grover Norquist’s Islamic Institute and the connections of the GOP/Islamist milieu to terrorism; Talat Othman’s delivery of a Muslim benediction at the GOP convention in 2000; review of the connections between the targets of the Operation Green Quest raids of 2002 and the Al Taqwa network; the relationship between Sami al-Arian and the targets of the 3/20/2002 raids; Talat Othman’s intercession on behalf of the targets of the Operation Green Quest raids; federal employees’ “accidental” destruction of key documents in the al-Arian investigation; review of the FBI’s alleged stonewalling of other federal agencies involved in combating terror.

1. Tracing the history of the Bush/Saudi relationship, the broadcast begins with discussion of the role of rich Saudis in the financing of Harken Energy—one of W’s failed oil ventures. For the purposes of this program, do not fail to note the presence in the Harken machinations of people closely associated with the BCCI milieu. ” . . . And yet, with the Bush name now on its marquee, suddenly all sorts of marvelous things started to happen to Harken—new investments, unexpected sources of financing, serendipitous drilling rights in faraway countries. All thanks to people who now found Harken irresistible—many of them close to BCCI, the Saudi-dominated bank that had political connections all over the world and whose biggest shareholder was Khalid bin Mahfouz. It was a phantom courtship.”(House of Bush/House of Saud; by Craig Unger; Scribner [HC]; Copyright 2004 by Craig Unger; ISBN 0-7432-5337-X; p. 118.)

2. The Saudis’ backing of Harken makes no sense in terms of the petroleum business—it only makes sense in the context of the purchasing of political influence. “Even if Harken had not had its liabilities, for Saudi billionaires, whose wealth came from the biggest oil reserves in the world, investing in Harken was at best truly a case of selling coals to Newcastle, ice to the Eskimos. ‘Think about it,’ explains Bush’s friend and business partner James Bath. ‘It doesn’t make sense. What we would consider a big oil drill here [in Texas] would be laughable to them.'” (Idem.)

3. Through the BCCI, the Saudis were able to gain a significant foothold in the U.S. ” ‘You had this terribly complicated dance,’ recalls a former senior Senate investigator into BCCI. ‘It was not just that the Saudis used BCCI to buy power. There were people in the United States who saw the opportunity to make scads of money. They weren’t exactly raping the system. It was more like consensual sex.'” (Ibid.; p. 119.)

4. “Neither George W. Bush nor Harken, it should be said, had any direct contact of any kind with bin Mahfouz or BCCI. Bin Mahfouz professed no knowledge of any intention to create a special relationship with Bush or Harken and, according to his attorney, ‘does not recall that the matter of BCCI’s relationship with Harken’ was brought up at BCCI board meetings or ‘in any other fashion.’ Likewise, Harken officials, including George W. Bush, said they were unaware of their new investors’ links to BCCI. On paper, there was no relationship whatsoever between the two institutions or their principals.” (Idem.)

5. “But like so much of what went on with BCCI, this elaborate dance often took place through convoluted financial transactions and third parties. It was not essential for the key players in this aspect of the Saudi-Bush drama even to know each other to have productive relationships. In fact, for many of the participants, the less they knew the better.” (Idem.)

6. Examining the history of the evolution of the Harken/Saudi/BCCI milieu and its influence on Bush and events that took place during his presidency, the broadcast highlights Abdullah Taha Bakhsh. It was as Bakhsh’s protégé that Talat Othman made his entrée into the Bush camp. Othman is a key player in the scenario we are examining in this program. “Before the deal could be finalized, however, the financing from UBS ran into unrelated difficulties and fell apart. As a result, still another financier was needed to rescue Harken. This time, Stephens introduced Harken to a new investor, Abdullah Taha Bakhsh, a real estate magnate from Jeddah, whose subsequent injection of capital resulted in his ownership of 17.6 percent of Harken’s stock.” (Ibid.; p. 121.)

7. “A well-known Saudi investor, Bakhsh had been a founding member of the board of Investcorp, the enormous global investment group. Bakhsh had had business dealings with the most prominent people in Saudi Arabia, including members of the Saudi royal family. He also had at least two ties to BCCI. According to the [Wall Street] Journal, he had been chairman of the Saudi Finance Co., a holding company partly controlled by BCCI shareholders. In addition, he was well acquainted with bin Mahfouz.” (Idem.)

8. There were denials all around concerning a causal relationship between Bakhsh’s role on Harken’s board and the BCCI relationship. Note that bin Mahfouz’s lawyer is Cherif Sedky, whom we will view later on in connection with the 3/20/2002 Operation Green Quest raids. “All parties concerned—bin Mahfouz, Bakhsh, and Harken—have denied that Bakhsh’s role in Harken had anything to do with BCCI or his relationship to bin Mahfouz. ‘Mr. Bakhsh was not in any way representing Khalid bin Mahfouz’s interests in any investment by Mr. Bakhsh in Harken Energy,’ says Cherif Sedky. . . .” (Idem.)

9. More about the Bakhsh/Harken/Bush/Othman relationship: ” . . . Yet there is evidence that Saudi favors to Bush interests had begun to pay off. In August 1990, Talat Othman, a Chicago investor of Arab descent who represented the interests of Abdullah Taha Bakhsh on the board of Harken Energy, was granted unusual access to the president and attended White House meetings with him to discuss Middle East policy—at a time of crisis during which the Gulf War was brewing. [Emphasis added.] The White House, George W. Bush, and Harken all denied that Othman’s presence was related to Bakhsh’s investment.” (Ibid.; p. 125.)

10. Next, the program highlights the role of then US Attorney Robert Mueller in helping to derail the BCCI investigation. Mueller is now head of the FBI. ” . . . In addition, according to the 1992 Senate BCCI investigation, the Bush Justice Department went to great lengths to block prosecution of BCCI. The Senate probe determined that federal officials repeatedly obstructed congressional and local investigations into BCCI, and for three years thwarted attempts by Manhattan district attorney Robert Morgenthau to obtain critical information about the bank.” (Ibid.; p. 126.)

11. Note that the Senate probe into BCCI (which was headed by John Kerry) was highly critical of the Justice Department’s conduct of the investigation. “The Senate investigation concluded that in 1990 and 1991 the Bush Justice Department, with Assistant Attorney General Robert Mueller leading the way, consistently put forth the public impression that it ws aggressively moving against BCCI. But, in fact, the Senate probe said the Justice Department was actually impeding ‘the investigations of others through a variety of mechanisms, ranging from not making witnesses available, to not returning telephone calls, to claiming that every aspect of the case was under investigation in a period when little, if anything, was being done.'” (Idem.)

12. “Specifically, among other charges, the Senate report alleged that a federal prosecutor lied to Morgenthau’s office about important material; that federal prosecutors failed to investigate serious allegations that BCCI laundered drug money; and that Justice Department personnel in Washington, Miami, and Tampa actively obstructed and impeded congressional attempts to investigate BCCI in 1990 . . .” (Idem.)

13. Much of the rest of the first side of the program is review of an excerpt from FTR#310 (recorded on 7/8/2001.) The excerpt focuses on Robert Mueller’s appointment as head of the FBI, and notes Mueller’s less than enthusiastic investigation of the BCCI case. Mr. Emory notes that, had the BCCI case been thoroughly and properly investigated, it would have implicated the elder Bush in the Iran/Contra and Iraqgate scandals, both of which involved BCCI. Mr. Emory also notes that a proper investigation of the case might have led to the James R. Bath/George W. Bush/Harken Energy/ Saudi relationship. That relationship involved the business connections between George W. Bush and James R. Bath. Bath was an early investor in Arbusto Energy, the first of W’s failed oil company ventures. He was also the business representative of the Bin Mahfouz and Bin Laden families in Texas. Those families may well have put up some of the initial capital for Arbusto. With Mueller ruling the roost at the FBI, it appeared (on 7/8/2001) that an investigation uncovering the Bush family’s business dealings with the Bin Ladens was unlikely. As we saw in FTR#’s 454, 462, the bureau appears to be derailing the investigation into Operation Green Quest. Bush selected Robert Mueller, a member of his father’s Justice Department, to be FBI director.(“S.F. Prosecutor Mueller Picked to Lead FBI, Mend Its Image” by Zachary Coile and Bob Egelko; San Francisco Chronicle; 7/6/2001; pp. A1-A12.)

14. In his work for the Bush Justice Department, Mueller was less than vigorous in his role overseeing the prosecution of General Noriega of Panama and the BCCI case. (“In the Running for FBI Director” by Stacy Finz; San Francisco Chronicle; 7/1/2001; pp. A1-A6.) Both the BCCI case and the Noriega case overlap the Iran-Contra investigation.) The elder Bush was principally involved in the Iran-Contra imbroglio. Full disclosure concerning the BCCI case would have led to investigation of James R. Bath, the Texas business representative of the Bin Laden family and one of the financiers of George W.’s first oil venture. Was Mueller appointed to forestall any investigation of these links, thus safeguarding the Georges Bush?.)

15. The GOP recruited Islamists to its cause for the 2000 campaign. A number of the individuals and institutions recruited by Norquist are implicated in the events in, and around, 9/11. Many of them were also focal points of Operation Green Quest. The Norquist/Islamist milieu also overlaps the Harken/Bush/BCCI milieu. “As a result, Norquist’s Muslim strategy was sometimes criticized—usually from the right—for giving credibility to Muslim groups that seemed harmless, but were in fact supporting extremist interests. . . . Nevertheless, with Norquist working behind the scenes, Bush aggressively pursued the Islamists in hopes of winning their endorsements. In appearances on TV, Bush and fellow campaign staffers referred not just to churches and synagogues as places of worship, but to mosques as well. Again and again, Governor Bush sought out meetings with Muslim leaders—often without looking into their backgrounds. He invited the founder of the American Muslim Council, Abdurahman Alamoudi, to the governor’s mansion in Austin. In the mid-1990’s, Alamoudi had played an important role in recruiting as many as a hundred ‘Islamic lay leaders’ for the U.S. military. The Wall Street Journal reported that he had arranged for ‘an arm of the Saudi government’ called the Institute of Islamic and Arabic Sciences to train ‘soldiers and civilians to provide spiritual guidance when paid Muslim chaplains aren’t available.’ The Journal added that there were indications that there were indications that ‘the school . . . disseminates the intolerant and anti-Western strain of Islam espoused by the [Saudi] kingdom’s religious establishment.’ A self-proclaimed supporter of Hamas and Hezbollah, Alamoudi reportedly attended a terrorist summit in Beirut later in 2000 with leaders of Hamas, Hezbollah, and Al Qaeda. But such a militant background did not keep Alamoudi away from Norquist and Bush. According to an article by Frank Gaffney, Alamoudi wrote two checks for $10,000 each, one an apparent loan, to help found Norquist’s Islamic Institute.”

16. “On March 12, 2000, Bush and his wife, Laura, met with more Muslim leaders at a local mosque in Tampa, Florida. Among them was Sami Al-Arian, a Kuwaiti-born Palestinian who was an associate professor of engineering at the University of South Florida. . . . But Al-Arian had unusual credentials for a Bush campaigner. Since 1995, as the founder and chairman of the board of World and Islam enterprise (WISE), a Muslim think tank, Al-Arian had been under investigation by the FBI for his associations with Islamic Jihad, the Palestinian terrorist group. Al-Arian brought in Ramadan Abdullah Shallah, the number-two leader in Islamic Jihad, to be the director of WISE. A strong advocate of suicide bombings against Israel, Shallah was allegedly responsible for killing scores of Israelis in such attacks.” (Ibid.; pp. 206-207.)

17. “Al-Arian also brought to Tampa as a guest speaker for WISE none other than Hassan Turabi, the powerful Islamic ruler of Sudan who had welcomed Osama bin Laden and helped nurture al Qaeda in the early nineties. . . .Nor were those Al-Arian’s only ties to terrorists According to American Jihad by Steven Emerson, in may 1998 a WISE board member named Tarik Hamdi personally traveled to Afghanistan to deliver a satellite telephone and battery to Osama bin Laden. In addition, Newsweek reported that Al-Arian had ties to the 1993 attack on the World Trade Center. Among his claims to fame, the magazine said, Al-Arian had ‘made many phone calls to two New York-area Arabs who figured in the World Trade Center bombing investigation.'” (Ibid.; p. 207.)

18. “There were also Al-Arian’s own statements. In 1998, he appeared as a guest speaker before the American Muslim Council. According to conservative author Kenneth Timmerman, Al-Arian referred to Jews as ‘monkeys and pigs’ and added, ‘Jihad is our path. Victory to Islam. Death to Israel. Revolution! Revolution! Until victory! Rolling, rolling to Jerusalem!’ That speech was part of a dossier compiled on al-Arian by federal agents who have had him under surveillance for many years because of suspected ties to terrorist organizations. In a videotape in that file, al-Arian was more explicit. When he appeared at a fund-raising event, Timmerman says, he’ begged for $500 to kill a Jew.'” (Idem.)

19. “Al-Arian would be arrested in Florida in February 2003 on dozens of charges, among them conspiracy to finance terrorist attacks that killed more than one hundred people—including two Americans. The indictment alleged that ‘he directed the audit of all moneys and property of the PIJ [Palestinian Islamic Jihad] throughout the world and was the leader of the PIJ in the United States.’ The charges refer to the Islamic Jihad as ‘a criminal organization whose members and associates engaged in acts of violence including murder, extortion, money laundering, fraud, and misuse of visas, and operated worldwide including in the Middle District of Florida.’ Al-Arian was still facing prosecution in December 2003.” (Ibid.; p. 208.)

20. Note that Harken director and political ally of George Bush Sr. and George Bush Jr. Talat Othman gave a Muslim benediction at the Republican convention. Be sure to review the discussion of Othman above, and note Othman’s role in interceding with then Treasury Secretary Paul O’Neill on behalf of the targets of the 3/20/2002 Operation Green Quest raids. ” . . . ‘The Al-Arian case was not a solitary lapse. . . . That outreach campaign opened relationships between the Bush campaign and some very disturbing persons in the Muslim-American community.’ Nevertheless, Norquist continued to build a coalition of Islamist groups to support Bush. On July 31, 2000, the Republican National Convention opened in Philadelphia with a prayer by a Muslim, Talat Othman, in which Othman offered a duaa, a Muslim benediction. It was the first time a Muslim had addressed any major U.S. political gathering. A third-generation American and a businessman from Chicago of Muslim-Arab descent, Othman was chairman of the Islamic Institute. He had also been the board member of Harken Energy representing the interests of Abdullah Taha Bakhsh, the Saudi investor who had helped Bush make his fortune by bailing out Harken in the late eighties. [Emphasis added] When the convention ended on August 3, after George W. Bush had formally been nominated for president, between his family’s extended personal and financial ties to the House of Saud and his campaign’s ties to Islamists, it could be said that he was truly the Arabian Candidate. . . .” (Ibid.; pp. 208-209.)

21. Norquist’s Islamic Institute significantly overlapped individuals and institutions targeted in the Operation Green Quest raids of 3/20/2002. A summary account of those raids and the investigation into the SAAR foundation and the Safa trust follows: ” . . . In the early morning hours of Wednesday, March 20, 2002, 150 federal agents—many with their guns drawn—raided fourteen offices and homes in the suburbs of Washington, D.C. FBI and Customs agents loaded seven panel trucks with more than five hundred boxes of documents, computers, and financial records of more than one hundred charities, think tanks, and businesses affiliated with the Herndon, Virginia—based SAAR Foundation. Most of the interrelated businesses and charities were run out of a single office at 555 Grove Street, a brown brick and glass three-story office complex on a quiet street.”(Blood from Stones: The Secret Financial Network of Terror; by Douglas Farah; Broadway Books [HC] {subsidiary of Random House}; Copyright 2004 by Douglas Farah; ISBN 0-7679-15262-3; p. 152.)

22. “The SAAR Foundation, the backbone of the cluster, takes its name from Sulaiman Abdul Aziz al Rajhi, head of one of Saudi Arabia’s wealthiest families, who funneled millions of dollars through the cluster of businesses and charities. The al Rajhi name was on the Golden Chain list of early al Qaeda supporters that was found in the Benevolence files in Sarajevo.” (Ibid.; pp. 152-153.)

23. “The SAAR Foundation was incorporated in Herndon, Virginia, on July 29, 1983, and formally dissolved on December 28, 2000. However, many of the foundation’s functions were taken over by the Safa Trust, an organization registered at the same address and run by several of the same board members. Law enforcement officials dubbed the maze of the overlapping companies, with shared directors, the Safa Group. The groups often financed each other, sending the money in circles. The scores of Safa organizations are controlled by about fifteen Middle Eastern and Pakistani men who serve with each other on a host of institutional boards. Four senior leaders of the network are Iraqis who had lived in Saudi Arabia, and have been members of the Muslim Brotherhood.” (Ibid.; p. 153.)

24. Note the role of Yaqub Mirza in the genesis of the organizations associated with SAAR and Safa Trust. “In the United States, the men used Saudi money to launch some of the nation’s leading Muslim organizations. In 1983, with money from the al Rajhi family, the SAAR Foundation was born. The director was Yaqub Mirza, a Pakistani native with a Ph.D. in physics from the University of Texas. Other groups were formed shortly afterward. Five of the top Safa executives live in spacious homes on adjoining lots in Safa Court in Herndon, a twenty-two-acre parcel of land bought by one of the SAAR-affiliated firms in 1987.” (Idem.)

25. “In time, the Safa network owned or invested in scores of businesses worldwide: dairy farms in Zimbabwe; schools in Ivory Coast; a huge poultry business in the state of Georgia; an Islamic mutual fund in Washington state; an investment company in Malaysia; shell companies in Panama; and commercial apple orchards in Chile. By the late 1980’s, the SAAR Foundation had become one of the Washington, D.C., region’s biggest landlords. ‘The funds came very easily,’ said a businessman who dealt with SAAR. ‘If they wanted a few million dollars, they called the al Rajhis, who would send it along.’ At the same time, the leaders of the SAAR Foundation incorporated and sat on the boards of charities and nonprofit organizations. Many were branches of Saudi charities that operate worldwide. . . .” (Ibid.; pp. 153-154.)

26. The program notes the significant overlaps between the SAAR network and the Al Taqwa network. ” . . . Operation Green Quest was launched in October 2001 as part of the Customs Service initiative to track bin Laden’s financial empire. In a small, windowless conference room Green Quest agents charted the Byzantine relationships among the more than one hundred Safa network entities, a spiderweb of overlapping names and organizations. Green Quest investigators also charted the relationship among the Safa network entities and the Muslim Brotherhood through the Al Taqwa Management empire of Yousef Nada. U.S. officials said they had tracked about $20 million from Safa entities flowing through Nada’s Bank al Taqwa, but said the total could be much higher.” (Ibid.; pp. 154-155.)

27. “The ties between Nada and Safa leaders were many and long-standing, as were their ties to other Brotherhood leaders. Two members of the Safa Group helped set up Bank al Taqwa in the Bahamas and several Safa leaders loaned Nada money. In 1976, two other men who later became prominent in the Safa Group founded Nada International, a Brotherhood bank in Liechtenstein. For a time, Sulaiman Abdul al Rajhi, the SAAR Foundation founder, worked for Nada at that bank. Nada International was designated a terrorist financier by the Treasury Department after 9/11. . . .” (Ibid.; p. 155.)

28. Do not Fail to take note of the role in the SAAR/Safa Trust milieu of Cherif Sedky, the above-mentioned lawyer for Khalid bin Mahfouz. The milieu targeted by the 3/20/2002 Green Quest raids is the BCCI/Harken milieu. It should not be surprising, therefore, to see the FBI, under Mueller, covering up Operation Green Quest. ” . . . SAAR lawyers said the $1.8 billion was reported because of a clerical error, despite the fact that the ten-digit number, $1,783,545,883, was repeated at least seven times on the form. Cherif Sedky, the foundation’s treasurer, said that he ‘did not recall’ that amount of money flowing through the company. . . . There is another thread in the Safa network that has drawn scrutiny from federal investigators, For the last five years of its existence, the treasurer of the SAAR Foundation, the group’s central entity, was Cherif Sedky, an American lawyer representing the al Rajhi family. Sedky is also the representative and business partner of Khalid bin Mahfouz, one of the wealthiest men in the world and longtime banker to the Saudi royal family. . . .” (Ibid.; p. 156.)

29. The Operation Green Quest raids were triggered by a raid on the aforementioned Sami al-Arian, the supporter of Bush and associate of Grover Norquist. ” . . . The Safa Group might have escaped scrutiny in 2001, if not for a raid that occurred seven years earlier, leading to another thread of investigation. In 1995, the FBI raided the home and offices of Sami al-Arian, a Kuwaiti-Palestinian computer science professor at the University of South Florida in Tampa. The feds suspected al-Arian, a slight, bearded, and balding man, was secretly funneling money to terrorists. They believed he was a senior member of the Palestinian Islamic Jihad, a group that unleashes suicide bombers against Israelis.” (Ibid.; p. 158.)

30. “Al-Arian was a vocal activist on Palestinian causes, and he frequently spoke at Islamic conferences. At one 1991 conference, al-Arian, dressed in the flowing robes of an imam, was videotaped shouting in Arabic ‘Let us Damn America, let us damn Israel. Let us damn their allies until death.’ In the early 1990s, al-Arian set up organizations to raise money for orphans and widows and the study of Islam. He used the organizations to sponsor Muslim conferences, including one that featured Omar Abdul Rahman, the blind Sheik who instigated the 1993 World Trade Center attack.” (Idem.)

31. “Al-Arian also sponsored the U.S. visa of Ramadan Abdullah Shallah, who joined al-Arian on the university faculty from 1992 to 1994. But Shallah suddenly disappeared in October 1995, immediately following the assassination of PIJ leader Fat’hi Ibrahim Shikaki. Shallah resurfaced a few days later at Shikaki’s funeral in Damascus, where the slain leader’s body was taken with full military honors. Shallah, standing by the casket, had been named Shikaki’s successor. Al-Arian said he was ‘shocked’ at Shallah’s ties to PIJ. But the FBI finally swooped in.” (Ibid.; pp. 158-159.)

32. “The raid on al-Arian led to the Safa Group. The FBI found letters documenting Safa entities’ financial support of al-Arian to the tune of tens of thousands of dollars a year. In a September 7, 1993, letter, Safa Group leaders told one al-Arian-led group: ‘We consider you a part of us and an extension of us and we as a part of you,’ adding that their financial donation of tens of thousands of dollars was ‘for you as a group, regardless of the party or façade you use the donation for.'” (Ibid.; p. 159.)

33. “But the al-Arian and Safa Group investigations languished. In the 2000 elections al-Arian supported George W. Bush, urging Muslims to vote Republican as the best hope of ending discrimination against Arab-Americans. Al-Arian and his family were photographed with a beaming Bush and his wife, Laura, during a Florida campaign stop. Al-Arian liked to boast that he had delivered ‘considerably more’ than the 537 votes that gave Bush his victory in Florida and allowed him to capture the White House. On June 20, 2001, al-Arian was invited to the White House as part of a large delegation of Muslims to be briefed by presidential adviser Karl Rove.” (Idem.)

34. Bush associate Talat Othman, a director of Norquist’s Islamic Institute, went to bat on behalf of the targets of the Operation Green Quest raids of 2002. “In 2002, during the presidency of George W. Bush, Othman again won access to the White House and met with Secretary of the Treasury Paul O’Neill to discuss U.S. government raids on Muslim charities that were allegedly funding terror.”(House of Bush/House of Saud; p. 125.)

35. Is it a “coincidence” that federal employees in Tampa “accidentally” destroyed key paperwork in the al-Arian case?! ” . . . In December 2003, clerks at a federal courthouse in Tampa accidentally destroyed search warrants in the Al-Arian case. The documents contained affidavits from federal agents that supported 1995 searches of Al-Arian’s home and offices and were among thousands of documents shredded sometime between 1998 and 2002. As this book went to press, there were serious questions as to whether the destruction of the documents might affect his prosecution.” (Ibid.; p. 208.)

36. Reviewing information presented in FTR#462, the program highlights the FBI’s attempts at monopolizing the Operation Green Quest investigation. Other agencies allege that the bureau is actively subverting their efforts at pursuing the case. ” . . . But as the Green Quest team made headlines, its investigations triggered a bitter dispute within the government. Internally, FBI officials have derided Green Quest agents as a bunch of ‘cowboys’ whose actions have undermined more important, long-range FBI investigations into terrorist financing. Green Quest sources, in turn, accuse the FBI of jealousy. Now that the Customs-led Green Quest operation has been folded into the new Homeland Security Department, Newsweek has learned, t

37. “One senior law-enforcement official called the lack of coordination between the FBI and Green Quest ‘an intolerable situation’ and noted that the bureau–not Homeland Security—has been formally designated by President Bush as the ‘lead agency’ for terrorism investigations. ‘You can’t have two lead agencies’ conducting terror cases, the official said.” (Idem.)

39. “‘They [The FBI] won’t share anything with us,’ said a Homeland Security official. ‘Then they go to the White House and they accuse us of not sharing . . . If they can’t take it over, they want to kill it.’ . . .” (Ibid.; pp. 1-2.)

40. Note that Yaqub Mirza, who set up the organizations targeted in the investigations into SAAR and Safa Trust, is alleged to have influence high inside the FBI. Mirza has not been charged by the Operation Green Quest investigators. ” . . . Furthermore, the FBI was aware that Ptech provided computer software for several government agencies, including the FBI itself, the FAA, the U.S. Treasury, the Department of Defense, the IRS, and the White House, proving a visible and viable threat to national security. The FBI ignored the repeated requests of concerned employees. Frighteningly, when an employee told the President of Ptech he felt he had to contact the FBI regarding Qadi’s involvement in the company, the president allegedly told him not to worry because Yaqub Mirza, who was on the board of directors of the company and was himself a target of a terrorist financing raid in March 2002, had contacts high within the FBI. [Emphasis added.]”(“Perilous Power Play: FBI vs. Homeland Security” by Rita Katz & Josh Devon; National Review; 5/27/2003; p. 2)

41. “Perhaps the FBI’s biggest blunder was in ignoring the enormous alleged terrorist financial network of companies and nonprofit organizations mostly in Herndon, Virginia, named by investigators as the ‘SAAR Network.’ The FBI had been aware that the SAAR Network was funneling money to al-Arian. The FBI chose to ignore the case for unknown reasons, though some have speculated it was due to the SAAR Network’s close association to wealthy Saudis who funded the network.” (Idem.)

42. “It was not until Operation Green Quest, a joint task force headed by U.S. Customs which sought to disrupt terrorist financing, picked up the scent of the SAAR Network that a raid occurred. In March, 2002, Green Quest, in a victory for Americans everywhere, raided the SAAR Network in 15 locations in the largest terrorist financial bust in U.S. history. . . .” (Ibid.; pp. 2-3.)

43. ” . . . Now, the FBI is attempting to wrest the SAAR Network investigation from Green Quest and take all the credit for Green Quest’s dedication and hard work. The agreement between Ashcroft and Ridge is a crushing blow to Green Quest, as it effectively dissolves the outstanding task force. According to the memorandum, ‘The secretary of [Homeland Security] agrees that no later than June 30, 2003, Operation Green Quest (OGQ) will no longer exist as a program name.’ [Emphasis added].” (Ibid.; p. 3.)

Discussion

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Shares on Saudi Arabia’s stock exchange, the Arab world’s biggest, had the largest drop in almost two years, led by banks and telecom companies, amid concern that fighting in Syria may escalate.

Al Rajhi Bank (RJHI), the biggest Saudi lender by market value, slid the most since August 2011, while Etihad Etisalat Co. (EEC), known as Mobily, also tumbled. Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemical maker, known as Sabic, fell to the lowest level since May 15.

The Tadawul All-Share Index (SASEIDX) declined 4.3 percent to 7,294.38, the biggest slump since August 2011, at the 3:30 p.m. close in Riyadh, the capital. The gauge has gained 7.3 percent this year.

“Today’s decline in the Saudi stock index is mainly linked to the geopolitical tensions in Syria and how it may impact the region overall,” Mohammed Al-Omran, president of the Gulf Center for Financial Consultancy in Riyadh, said today in a phone interview. “There are diplomatic movements by international leaders to arm Syrian rebels, and the sudden return of King Abdullah following such news alarmed people.”

King Abdullah interrupted his vacation in Morocco yesterday and returned to Jeddah because of “escalating concerns relating to events in the region,” the state-owned Saudi Press Agency said. The same day, Saudi Sheikh Saud al-Shuraim, an Imam at the Grand Mosque in Mecca, denounced in a sermon what he referred to as “tyranny” in Syria under President Bashar al-Assad.

Proxy War

The conflict in Syria, which has killed at least 93,000 people based on a United Nations’ study, is threatening to become a larger regional proxy war as the U.S. steps up its involvement in the conflict.

President Barack Obama decided to send light weapons to the Syrian opposition as the Assad regime made military gains on the battlefield. Regime forces supported by fighters from the Iranian-backed Hezbollah have moved north after defeating rebels in al-Qusair, a setback that triggered concern in Washington that Iran and its Lebanese ally are tipping the balance in favor of Assad.

The U.S. has located 300 Marines in northern Jordan near the border with Syria along with a Patriot anti-aircraft missile system, the London-based Times reported. The deployment north of Al-Mafraq is being described as a military training exercise but it will remain in place for several months, the newspaper said.

“The king returned to Saudi Arabia perhaps because of what is coming up in Jordan regarding the Syrian civil war,” Ted Karasik, director of research at the Institute for Near East and Gulf Military Analysis in Dubai, said in a phone interview. “What is going to happen is that some Arab nations, particularly Saudi Arabia, are going to ask the Free Syrian Army to move to the south in safe haven that perhaps may contain a no-fly zone.”

So 9/11 Commission co-chairman Bob Graham wants the 28 pages released because it would demonstrate elite Saudi complicity in the 9/11 attacks. The Saudi government also wants the pages released because they claim it will refute the allegations. And 9/11 Commission co-chairman Philip Zelikow and the Republicans on the House and Senate intelligence committees would prefer that we all just forget about what’s in those 28 pages. That’s all part of why it’s been so hard not to be a little curious about what’s in those documents, and it not getting any easier:

The New York TimesClaims Against Saudis Cast New Light on Secret Pages of 9/11 Report

By CARL HULSEFEB. 4, 2015

WASHINGTON — A still-classified section of the investigation by congressional intelligence committees into the Sept. 11, 2001, attacks has taken on an almost mythic quality over the past 13 years — 28 pages that examine crucial support given the hijackers and that by all accounts implicate prominent Saudis in financing terrorism.

Now new claims by Zacarias Moussaoui, a convicted former member of Al Qaeda, that he had high-level contact with officials of the Saudi Arabian government in the prelude to Sept. 11 have brought renewed attention to the inquiry’s withheld findings, which lawmakers and relatives of those killed in the attacks have tried unsuccessfully to declassify.

“I think it is the right thing to do,” said Representative Stephen F. Lynch, Democrat of Massachusetts and an author of a bipartisan resolution encouraging President Obama to declassify the section. “Let’s put it out there.”

White House officials say the administration has undertaken a review on whether to release the pages but has no timetable for when they might be made public.

Mr. Lynch and his allies have been joined by former Senator Bob Graham of Florida, who as chairman of the Senate Intelligence Committee was a leader of the inquiry. He has called for the release of the report’s Part 4, which dealt with Saudi Arabia, since President George W. Bush ordered it classified when the rest of the report was released in December 2002.

Mr. Graham has repeatedly said it shows that Saudi Arabia was complicit in the Sept. 11 attacks. “The 28 pages primarily relate to who financed 9/11, and they point a very strong finger at Saudi Arabia as being the principal financier,” Mr. Graham said last month as he pressed for the pages to be made public.

Relatives of those killed on Sept. 11 as well as plaintiffs in a federal lawsuit against Saudi Arabia have also demanded that the pages be made public, seeing them as the vital link that they believe connects an important ally of the United States to the deadly attacks. They say the pages, Part 4 of the report, could also help in determining the source of current funding for terrorist activities.

“If we stop funding of terrorism and hold those people accountable, wouldn’t it make a dent in the financing of terrorism today?” asked William Doyle, whose son, Joseph, was killed in the World Trade Center. Mr. Doyle said that President Obama personally assured him after the death of Osama bin Laden that he would declassify that section of the report.

Proponents of releasing Part 4, titled “Finding, Discussion and Narrative Regarding Certain National Security Matters,” have suggested that the Bush and Obama administrations have held it back for fear of alienating an influential military and economic partner rather than for any national security consideration.

Others familiar with that section of the report say that while it might implicate Saudi Arabia, the suspicions, investigatory leads and other findings it contains did not withstand deeper scrutiny. Philip D. Zelikow, the executive director of the national commission that investigated the Sept. 11 attacks after the congressional panels, said the commission followed up on the allegations, using some of the same personnel who wrote them initially, but reached a different conclusion.

“Saudi Arabia has long been considered the primary source of Al Qaeda funding, but we have found no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization,” the commission said in its July 2004 report. It did note, however, the “likelihood that charities with significant Saudi government sponsorship diverted funds to Al Qaeda.”

Mr. Zelikow pointed to the more thorough investigation undertaken by the commission.

“Those involved in the preparation of the famous 28 pages joined the staff of the 9/11 Commission and participated in the follow-up investigation of all the leads that had been developed earlier,” he said Wednesday. “In doing so, they were aided by a larger team with more members, more powers and for the first time actually conducted interviews of relevant people both in this country and in Saudi Arabia.”

“And what we found is reflected in the commission report,” he said.

Demands for the release of the 28 pages began soon after the intelligence committees finished their work. In 2003, more than 40 senators called on Mr. Bush to order the material’s disclosure. He refused, saying “we won’t reveal sources and methods that will compromise our efforts to succeed” in fighting terrorism.

The Saudi government has also said it favored making the 28 pages public because that would make it easier to refute what it said were unfounded allegations. The embassy said Wednesday that it stood by that position.

Representative Walter B. Jones, a North Carolina Republican pushing for the release of Part 4, said the Moussaoui claims might give momentum to the declassification effort. He said he was approached Wednesday on the House floor by lawmakers inquiring how to view the 28 pages.

But there seemed to be little appetite for declassification among the Republican leaders of the intelligence panels. Senator Richard M. Burr, the North Carolina Republican who heads the Senate Intelligence Committee, said he was skeptical of the value of releasing the pages, calling them more of a historical document in a fight against terrorism that has shifted substantially since 2002.

“There may have been a level of participation by some Muslim country that is not commensurate with today,” he said.

Representative Devin Nunes, Republican of California and the chairman of the House Intelligence Committee, said “the authority to declassify this document lies with President Obama.”

Advocates of releasing the document have been frustrated by Mr. Obama, noting that Democrats were much more aggressive in pushing for its disclosure when Mr. Bush was president.

Mr. Doyle and Kristen Breitweiser, whose husband, Ronald, was killed on Sept. 11 in the World Trade Center, say the president assured them during separate meetings with families of the victims of the attack that he saw no reason the document should be withheld.

Mr. Doyle said he encouraged Mr. Obama at a meeting in May 2011 with surviving family members to follow through on a pledge he made two years earlier to Ms. Breitweiser. “He said: ‘Bill, I know about the pages. I promise I am going to get them released,’ ” Mr. Doyle recounted.

The White House said it was responding to the calls to consider releasing the material.

…

While the circumstances that will finally result in the release of those 28 pages have been open question for years, and the representatives GOP would clearly prefer the pages are never released, it’s worth noting that we might be seeing a surprisingly strong push to declassify those documents specifically over the next year with the factions of the GOP pushing the strongest. It sort of depends on how the 2016 GOP primaries go:

WASHINGTON – Innocent people jumping out of windows hundreds of feet to their certain deaths on live television. Skyscrapers falling. The nation’s capital and its biggest city under attack. America had never seen anything like Sept. 11, 2001.

When Pearl Harbor was attacked on Dec. 7, 1941, there was no doubt as to who was the culprit. America declared war on Japan the next day. And, after the Sept. 11 attacks, the world quickly learned 19 hijackers had turned four commercial airliners into missiles and 15 of the gang were citizens of Saudi Arabia.

But 13 years after that fateful autumn day, there are still questions about who planned and financed the attacks on the World Trade Center and the Pentagon. Questions, especially, about the role of the Saudis.

Actually, former Sen. Bob Graham, D-Fla., who co-chaired the joint Senate-House investigation into the Sept. 11 attacks, has no doubt, having told a court, “I am convinced that there was a direct line between at least some of the terrorists who carried out the September 11th attacks and the government of Saudi Arabia.”

Graham made the remarks in an affidavit filed in a lawsuit brought by families of 9/11 victims against the government of Saudi Arabia.

But the details haven’t been made public yet, because of the extensive redactions in the official 9/11 report that was released, a move during the administration of George W. Bush that Graham calls a “cover-up.”

For what it called reasons of “national security,” the Bush administration removed 28 pages of the bipartisan “Joint Inquiry into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001? that was published in 2002.

That move could boomerang.

“If it (the 28 pages) came out it would be devastating to some Republicans who are thinking about running for president. I think that’s one reason there’s been a drive not release it,” Rep. Steve Stockman, R-Texas, told WND.

Although Stockman declined to identify which potential candidates he was referring to, a well-placed source in the Republican party told WND it undoubtedly included Jeb Bush, the former president’s brother and former governor of Florida.

Stockman did add that he thought the decision to keep the pages classified was due more to politics than security.

And a deeper look shows if the Bushes did have reasons for wanting to keep some details secret, President Obama may also have his own reasons to keep the pages under wraps.

A bill sponsored by Walter Jones, R-N.C., and Stephen Lynch, D-Mass., urging the president to release the 28 redacted pages to the public is gaining new momentum as the 13th anniversary of the attacks approaches.

Stockman, who co-sponsored the bill, told WND, “It is important people see it. It is a bipartisan push release those documents.”

He also found a practical reason to release the classified section of the report: to avoid repeating the mistakes of the past, some of which, he said, were outlined in the documents.

“And citizens have a right to know what the mistakes were,” he added. “Law enforcement also deserves to know what mistakes not to repeat. Ignoring facts never is helpful.”

Although the 28 pages are classified, much of their contents has been reported over the years, and some have found the information shocking.

In 2003,New York Times reported the investigation found Saudi officials may have given money to the hijackers. Sources told the Times the report suggests Saudi national Omar al-Bayoumi, ostensibly employed as a civil aviation contractor in San Diego, was actually working with Saudi intelligence.

The paper said the report found “despite the fact that he was a student, Bayoumi had access to seemingly unlimited funding from Saudi Arabia.”

The Times also said the report urged further investigation of whether he and another Saudi national had any involvement in the Sept. 11 plot.

When asked if he was concerned the Saudis may have financed the hijackers or the planners, Stockman replied, “I think what’s been publicly written shows there is some concern that was the case.”

If members of the Saudi government did in fact assist the hijackers, would that not be an act of war on the U.S.?

The congressman, who declined to say whether he had read the redacted pages, also declined to address that question directly, telling WND, “I can talk about what’s going on right now.”

“The administration is meeting with the Saudis regarding the current financing of ISIS and other groups whose actions, quite frankly, are as detrimental to the Saudi government as they are to the United States,” said the congressman. “And that has, apparently, been going on for many years.”

…

“If it (the 28 pages) came out it would be devastating to some Republicans who are thinking about running for president. I think that’s one reason there’s been a drive not release it,” Rep. Steve Stockman, R-Texas, told WND.

Saudi Threat to Dump U.S. Assets Is Very Exaggerated
It’s not the ’80s anymore. Saudi Arabia’s financial clout is sinking as plunging oil prices force it into hock.

By Randall W. Forsyth
April 21, 2016

Back in the early 1980s, long before The Big Short, there was a fictional financial thriller called Rollover. Starring Jane Fonda, before she hawked exercise videos, and Kris Kristofferson, who won a Worst Actor Razzie Award for his performance, the flick portrayed the supposed global economic chaos that would ensue if Arab oil exporters were to refuse to roll over their petrodollar deposits.

Fast-forward to 2016. “Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill,” declares the lead story in last Saturday’s New York Times. The Saudi foreign minister told the White House the kingdom “would be forced to sell up to $750 billion in Treasury securities and other assets in the United States before they could be in danger of being frozen by American courts,” the Times reported.

That supposedly would happen should Congress pass legislation that would allow the Saudi government to be sued for damages resulting from the Sept. 11, 2001, terrorist attacks. The 9/11 Commission report found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization” responsible for the attacks. But suspicions of Saudi involvement—contained in 28 classified pages of a 2002 Congressional report—remain. And families of 9/11 victims have pressed their case against the Saudi government for its alleged support for terrorism, but have been thwarted by a law shielding foreign governments from some suits in U.S. courts.

The legislation under consideration would remove that immunity from governments determined to have killed American citizens on U.S. soil. The Obama Administration opposes the measure because it could expose U.S. troops and citizens to retaliatory actions.

Whatever the legal merits of the argument over the legislation, the financial threats appear far less than advertised. With the plunge in the price of oil, not only are the Saudis’ assets far less than advertised, the kingdom is having to go into hock to cover its mounting bills.

Bianco Research points out that, as of the latest February data from the U.S. Treasury, all members of the Organization of Petroleum Exporting Countries together hold a total of $281 billion—“a far cry from $750 billion.” Total official Saudi foreign exchange holdings totaled $592 billion, also well short of the purported $750 billion in U.S. assets.

…

The Financial Times Wednesday reported the Saudis were raising $10 billion in a syndicated bank loan, the first time the kingdom has had to borrow since 1991. That comes after a $120 billion plunge in reserves since late 2014 and a ballooning of its fiscal deficit to 19% of gross domestic product—a shortfall that would make Greece shudder—all resulting from the collapse in crude.

The bank loan opens the way for Saudi Arabia to float a multibillion-dollar bond issue to cover its fiscal gap, the FT says. Meanwhile, Saudi Aramco is preparing an initial public offering that would raise about $106 billion, Bloomberg reported, which would give the state-owned oil company a market capitalization of $2 trillion.

That the Saudis are issuing billions in debt and selling off a portion of their crown jewel provides ineluctable evidence that they need the dough. While Saudi Arabia may be the low-cost oil producer, the oil revenues simply don’t cover their spending.

That suggests the Saudi threat to dump Treasuries is less daunting. As the Times notes, foreign official holders have liquidated $225 billion of Treasuries in the past year—and their yields remain near historic lows nonetheless. And given the Saudis’ cash needs, they will likely continue to sell off their foreign assets regardless.

…

“That suggests the Saudi threat to dump Treasuries is less daunting. As the Times notes, foreign official holders have liquidated $225 billion of Treasuries in the past year—and their yields remain near historic lows nonetheless. And given the Saudis’ cash needs, they will likely continue to sell off their foreign assets regardless.”
So the Saudis were basically threatening to do what they were going to have to do anyways: sell assets to raise cash. And they’ve been doing it significantly already, and it hasn’t really made a dent in the US Treasury market. That’s bad news for the Saudis’ ability to issue financial threats, but it’s probably good news for their finances. After all, if the threat of a Saudi sell off really was big enough create upheaval in the market for US Treasuries, that value of all those assets the Saudis are threatening to sell would plummet in the process. In other words, by not being threatening, the value of the assets used to issue the threat is at least going to be held steady while the Saudis sell off the assets raise the cash they’re going to need with or without the threat.

So in the short-run, it doesn’t appear that the Saudi threat is all that meaningful. In the long-run, however, it’s probably worth asking what happens to the array of Saudi interests when the oil-rush finally comes to an end and there simply is to giant treasure trove available for wield the kingdom’s influence across the globe. Saudi Arabia is a massive source of the financing that backs militant Sunni Islam, after all, so when that country starts running out of cash, won’t the broad array of mosques, religious foundations, and propaganda networks that rely on that funding start running out of cash too? What is this going to mean for both the region and Sunni Islam in general over the next 50 years if a recognition sets in that the end is near for all that oil-financed sugar? Will that have a moderating effect on Sunni fundamentalist Islam or will those strains of the religion go even more nuts once the money spigot goes dry? Let’s hope it’s the former and not the latter, but at least one group of trouble-makers would be unambiguously moderated for the good if the Saudis ran out of cash.

Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman laid out an ambitious goal for the nation to wean itself off of its “addiction” to oil…as soon as 2020. So, if everything goes as planned, the nation should have an overhauled economy in a few short years. Obviously that’s going to take a lot longer, but it is pretty inevitable that the nation is going to have to transition away from petroleum-based economy as soon as possible, so the sooner they get started the better. So we should probably all wish the Saudis the best of luck in successfully carrying out this modernization process. They’re going to need it:

Reuters

Saudi Arabia will struggle to kick its addiction to oil

LONDON | By John Kemp
Thu Apr 28, 2016 12:26am IST

“King Abdulaziz and the men who worked with him for the establishment of the state did not depend on oil and they established the kingdom without oil, and they ran this state without oil, and they lived in this state without oil,” Saudi Deputy Crown Prince Mohammed bin Salman said in an televised interview on Monday.

The deputy crown prince criticized the kingdom’s subsequent “addiction” to oil which has “disrupted the development of many sectors in the past years” implying this was a relatively recent problem.

The prince claimed his national transformation program would enable the kingdom to “live without oil” as early as 2020 (“Transcript of Prince Mohammed bin Salman’s Interview”, Al Arabiya, April 25).

But if modern Saudi Arabia was founded by conquest and the skilful statesmanship of Abdulaziz, it has been held together by the revenue from oil, even more than conservative religion.

Distribution of oil revenue to client groups has formed the foundation of the state from its earliest years and shaped the contours of the economy and society.

Sharing oil wealth in exchange for popular submission to absolute monarchical rule has always been central to the social contract between the ruling Al Saud and the kingdom’s population.

Transforming that contract so that it does not center on oil is an enormously ambitious undertaking fraught with considerable risks and with an uncertain chance of success.

OIL AND ARABIA

Before the discovery of oil, Saudi Arabia was a desperately poor country, with a largely subsistence economy and depending on the annual pilgrimage to Mecca and Medina.

The modern state was assembled through a series of conquests between 1902 and 1926 and proclaimed as the unified Kingdom of Saudi Arabia in 1932.

At the time, the only government revenue came from customs duties, pilgrimage taxes and tithes. From the start, the state was short of money and desperately looking for additional sources of income.

One reason the kingdom granted a concession in 1933 to prospect for oil to the U.S. company Socal rather than Britain’s Iraq Petroleum Company was that Socal was prepared to offer more cash up front and loans to be repaid from future production (“A king and a concession”, Aramco, 1984).

In 1938, the government’s revenue amounted to just $7 million, according to Arthur Young, the U.S. financial expert sent out after World War Two to help set up the Saudi Arabian Monetary Agency.

The first commercial oil discovery was made the same year and the kingdom received $340,000 in oil royalties (“Saudi Arabia: the making of a financial giant”, Young, 1983).

Hopes of an immediate bonanza were delayed by the world war, which led to the postponement of exploration and development work. But once the war ended, production and oil revenue began to ramp up.

The kingdom’s annual oil revenue surged from $340,000 in 1938 to $10 million in 1946, $57 million in 1950, $334 in 1960, $1.2 billion in 1970 and $84 billion in 1980.

MONEY AND POWER

Even before oil, gift-giving was an important element of the compact between the ruler and his subjects, and the need to demonstrate generosity frequently strained royal finances (“Two kings in Arabia”, Bullard, 1993).

Once the gusher of oil revenue arrived, it provided the scope to co-opt almost all social groups and make them clients of the state.

Tribal groups were granted generous state subsidies and recruited into the national guard. Hundreds of thousands of other citizens have been put on the payrolls of the armed forces and various ministries.

Money could also be used to settle tensions within the royal family by allowing each senior prince to be given their own vast and essentially autonomous bureaucratic fiefdom.

Oil wealth enabled the state to avoid levying income and other taxes and to subsidize the provision of basic services including water, electricity and gasoline.

Oil wealth enables Saudi Arabia to maintain more than 250,000 men under arms and run the world’s third-largest defense budget (“Princes, brokers and bureaucrats: oil and the state in Saudi Arabia”, Hertog, 2010).

More or less everything in modern Saudi Arabia depends directly or indirectly on oil.

BUDGET PROBLEMS

From the very beginning, however, expenditure tended to run ahead of receipts. “When oil production and spending grew after the war, spending grew even faster”, according to Young.

…

The kingdom’s history from the 1950s to the 2010s has been a series of oil-fueled booms followed by painful adjustments when oil prices fell and revenue shrank.

ADDICTED TO OIL

Periodic crashes in the oil price and state revenue have brought periodic calls to adjust the social compact between the state and its citizens.

Prince Mohammed, effectively the kingdom’s top economic policymaker, is not the first ruler to complain about the country’s addiction to oil (“Saudi reform efforts wax and wane with oil prices,” Reuters, February 2016).

…

TRANSFORMATION

Prince Mohammed’s “SaudiVision2030”, adopted by the cabinet and published on Monday, is essentially a diversification strategy which aims to move the kingdom away from dependence on oil revenue (April 2016).

It is closely modeled on an earlier and even more comprehensive study by the McKinsey Global Institute entitled “Saudi Arabia beyond oil: the investment and productivity transformation” (December 2015).

The aim is to shift the economy away from an almost exclusive reliance on oil (and the spending of oil revenue) to develop other sectors such as mining, manufacturing, retail, tourism, pilgrimage, and healthcare.

The strategy also envisages developing the country as a logistics hub for East-West trade, becoming a financial services center, localizing defense manufacturing, and development more small and medium-sized enterprises.

The prince has stressed that much of the transformation can be achieved through improvements in government efficiency and restructuring (termed “qawam” in the vision document).

There is no doubt Saudi Arabia needs to undertake these changes, and a younger generation of policymakers has brought an increased sense of urgency to tackling the problems.

But describing the kingdom’s problem as an “addiction” to oil, as if it was incidental, rather than a fundamental part of the political, social and economic structure, risks understating the challenge involved.

External commentators have focused on the valuation likely to be realized from a part-privatisation of state-oil company Saudi Aramco but that is the least of the problems.

True diversification requires developing industries which have nothing to do with the extraction of oil and spending of oil-related revenue.

Pilgrimage is a natural choice but the business environment for other sectors such as finance, logistics and manufacturing remains forbiddingly tough.

Saudi Arabia’s rulers must construct an attractive place to do business when companies currently have much simpler alternatives such as the United Arab Emirates.

“But describing the kingdom’s problem as an “addiction” to oil, as if it was incidental, rather than a fundamental part of the political, social and economic structure, risks understating the challenge involved.”
Yep, when you have a single-sector economy, breaking your nation’s addiction to that sector is kind of like breaking your addiction to the only available food source. You need something to sustain yourself. Especially when the distribution of that sole food source is critical to maintaining the existing power structure:

…
Distribution of oil revenue to client groups has formed the foundation of the state from its earliest years and shaped the contours of the economy and society.

Sharing oil wealth in exchange for popular submission to absolute monarchical rule has always been central to the social contract between the ruling Al Saud and the kingdom’s population.
…

It’s going to be a lot harder to justify the Saudi Arabian people’s status as royal subjects if the King can’t afford to provide basic services. At the same time, while most the talk is about weaning the country away from the petroleum economy, that talk doubles as calls for widespread austerity unless some new source of significant revenues suddenly pops up. It’s basically inevitable, especially when the plans appear to focus around “improvements in government efficiency and restructuring”

…

The prince has stressed that much of the transformation can be achieved through improvements in government efficiency and restructuring (termed “qawam” in the vision document).
…

That sure sounds like austerity chatter! Sure, there’s no doubt some austerity-free efficiencies that could be realized simply by reducing things like royal graft (or cutting back on the third largest defense budget in the world). But it’s hard to see how a post-petroleum Saudi economy isn’t going to involve immense austerity for the masses and big cut backs in public services. At the same time, the worse things look, and the less stable the future looks for the Saudi royals, the greater the incentive for the royals to accelerate the destabilization process by looting what wealth remains and getting out of there.

In other words, the bribes that keep the rabble complacent are coming to an end. What’s the rabble going to do when that happens, especially if the royal family continues to live in opulence? That seems like a pretty massive systemic risk to the stability of the Saudi system. And the riskier it looks, the greater the incentives for the royal family to get as much wealth stashed away in offshore accounts and other wealth havens. So while turning Saudi Arabia into a global financial center appeared to be one of those plans for shoring up the Saudi economy in a post-petroleum era, we probably shouldn’t be super surprised if one of the main services provided by that financial sector is the secret movement of the vast remaining wealth out of the country. At least, that’s going to be something to watch for as this ambitious plan takes hold.

So let’s hope that’s the direction the Saudi royals decide to take. Who knows, Blue Gold could be social glue that keeps the royals in power for in the 21st century. After all, while humanity’s addiction to oil made the royals a big enough treasure trove to maintain their grip on power in decades past, the 21st century addictive substances of choice will probably be different .